Key Findings
State plans require budget allocations and not simply an increase in ratepayer dollars.
The new rate covering the cost of the bond is lower than what is currently paid for the existing coal plant. The cost savings are then, in theory, passed along to consumers.
There are several factors that suggest the law will have no impact on hastening the retirement of coal plants.
Executive Summary
The proposed Colorado Energy Impact Assistance Act currently being considered in the Colorado legislature raises important questions concerning how to shut down coal plants at a faster pace than is currently taking place. It uses the right tools – legislation and regulation – but in the wrong way.
As a business incentive, this measure will have no significant impact on accelerating coal plant closures. If enacted, the “securitization” plan would tie up ratepayer dollars for decades to come on an economically dead asset – those funds would be more productively deployed for renewable energy development and other much needed investments to improve Colorado’s electricity system as well as fight climate change. As structured, the law would set a dangerous and unnecessary precedent by effectively paying an excessive amount to utilities that are seeking to close economically worthless assets. Finally, the envisioned assistance to workers and communities will likely be insufficient to meet the true needs of those harmed by the closures. It additionally neglects to include coal mine workers and their communities.
The Colorado legislature has, to its credit, recognized the need for the state to support employees who are displaced due to power plant closures and to assist the communities that host power plants. Such an acknowledgement is of particular importance as it reflects the major contribution that the coal industry has made to Colorado as an employer, taxpayer and source of economic growth. The State’s legislative response reflects the local and regional roots of the coal industry but also serves as a reminder that coal has been a mainstay of national economic growth.
However, despite coal’s many contributions to the national economy, there is no comparable effort at the federal level to support displaced workers and their communities. Coloradans generally, and its coal communities and employees specifically, contributed mightily to the nation’s economic expansion, but now they are expected to shoulder alone the burden of coal’s decline. In the absence of a federal response, it is to the state’s credit that it is stepping up.
Colorado would be better served, however, by a plan that sets deadlines for closing uneconomical and unneeded coal plants and allows the state’s Public Utilities Commission (PUC) and the utilities management to work through the changes. This needs to be combined with a road map for using tax dollars to alleviate communities of any resulting economic hardship. The combination of the state’s current regulatory structure and the options available to utilities to manage the decline of coal provide a strong foundation for accelerating the closure of uneconomic coal plants. If it is the will of the legislature to use this proposed framework, then a timeline needs to be built into the process. There are numerous alternatives, including:
- a mandated plan to close plants,
- limits on the number of applications and/or the aggregate value of assets that can be securitized (converted into cash or loans), or
- a sunset provision (statutory expiration) for the use of the securitization mechanism.
Finally, the State’s acknowledgement of the needs of its people and municipal governments requires state budget allocations and not simply an increase in ratepayer dollars. The assistance act also needs to be expanded to include coal miners and communities that host coal mines slated for closure.
The statute sets the resource availability to meet the human and fiscal needs it has identified based on the vagaries of expected savings to one randomly selected coal plant. These amounts bear no relation to the precise and measurable hardships experienced by families who must contend with disruptions to household employment and income.
Furthermore, the needs of municipalities are well known and losses of revenue can be measured in consequent cuts to the number of teachers, health care workers, and police as well as declines in access to public facilities that sustain Colorado’s quality of life. A more rational standard of estimating real needs is required, and a more certain source of funding must be established to meet that need.
Please view full report PDF for references and sources.
Press release: IEEFA briefing note: Colorado legislature should re-think Energy Impact Assistance Act
